Later this month, the Federal Deposit Insurance Corp. will consider new rules that define what a safe or “qualified” residential mortgage is as part of the Dodd-Frank financial overhaul law. Experts say the classification will likely have broad sweeping effects on the mortgage market..
The Dodd-Frank financial "overhaul law", another congressional mess which was passed last summer, contains a risk-retention requirement that requires issuers of securities backed by mortgages and other assets to maintain 5 percent of the risk of a loan, if it is packaged into a security and sold to investors, Dow Jones reports. The idea is that lenders would be more careful with making loans since they would face steeper losses if a loan went bad.
Six federal agencies are working to resolve numerous issues on the proposal but one of the most controversial issues yet to be resolved is which loans are exempt from the risk-retention requirement and would be considered safe or “qualified” mortgages.
Regulators have suggested issuing two different plans for public comment: One plan would call for a minimum 20 percent down payment, and another plan would recommend a 10 percent down payment as well as mortgage insurance. These guys expect heated debate.
FDIC banking regulators have called for a minimum 20 percent down payment requirement for new mortgages, but lawmakers and consumer advocates have argued that number is too high and could hamper an already sluggish housing market.
Loans guaranteed by Fannie Mae and Freddie Mac, which make up about 70 percent of the mortgage market, are expected to be exempt as long as they remain under government control. Government agencies such as the Federal Housing Administration are already exempt.The important issue is that conventional mortgage loans were not the loans that posed a problem to the mortgage market, and today continue to perform very well. Loans made to unqualified individuals due to relaxation of requirements to get a loan (if you fog a mirror, you get a mortgage), no income check loans, and option arm loans are the basis for the mortgage meltdown and subsequent housing crash.
I believe that the 20% requirement will hurt first-time home buyers. What are your thoughts on this? I look forward to your comments, which I will share with the National Association of Realtors.
The Dodd-Frank financial "overhaul law", another congressional mess which was passed last summer, contains a risk-retention requirement that requires issuers of securities backed by mortgages and other assets to maintain 5 percent of the risk of a loan, if it is packaged into a security and sold to investors, Dow Jones reports. The idea is that lenders would be more careful with making loans since they would face steeper losses if a loan went bad.
Six federal agencies are working to resolve numerous issues on the proposal but one of the most controversial issues yet to be resolved is which loans are exempt from the risk-retention requirement and would be considered safe or “qualified” mortgages.
Regulators have suggested issuing two different plans for public comment: One plan would call for a minimum 20 percent down payment, and another plan would recommend a 10 percent down payment as well as mortgage insurance. These guys expect heated debate.
FDIC banking regulators have called for a minimum 20 percent down payment requirement for new mortgages, but lawmakers and consumer advocates have argued that number is too high and could hamper an already sluggish housing market.
Loans guaranteed by Fannie Mae and Freddie Mac, which make up about 70 percent of the mortgage market, are expected to be exempt as long as they remain under government control. Government agencies such as the Federal Housing Administration are already exempt.The important issue is that conventional mortgage loans were not the loans that posed a problem to the mortgage market, and today continue to perform very well. Loans made to unqualified individuals due to relaxation of requirements to get a loan (if you fog a mirror, you get a mortgage), no income check loans, and option arm loans are the basis for the mortgage meltdown and subsequent housing crash.
I believe that the 20% requirement will hurt first-time home buyers. What are your thoughts on this? I look forward to your comments, which I will share with the National Association of Realtors.
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